US President Donald Trump’s doubling of tariffs on imports from India to as much as 50% took effect as scheduled on Wednesday, delivering a serious blow to ties between the two countries that became strategic partners after the turn of this century.
A punitive 25% tariff imposed due to India’s purchases of Russian oil adds to Trump’s prior 25% tariff on many imports from the South Asian nation. It takes total duties to as high as 50% for goods such as garments, gems and jewellery, footwear, sporting goods, furniture and chemicals – among the highest imposed by the U.S. and on par with Brazil and China.
The new tariffs threaten thousands of small exporters and jobs, including in Prime Minister Narendra Modi’s home state of Gujarat, and are expected to hurt growth in the world’s fastest growing major economy.
There was no domestic market reaction to the move on Wednesday as bourses were closed for a Hindu festival but equity benchmarks logged their worst session in three months on Tuesday after a Washington notification confirmed the additional tariff.
The Indian rupee also continued its losing streak for a fifth consecutive session on Tuesday, ending at its lowest level in three weeks.
While the tariff disruption would be bruising, it may not be all gloom and doom for the world’s fifth largest economy if New Delhi can further reform its economy and become less protectionist while seeking to resolve the crisis with Washington, analysts said.
India’s Commerce Ministry did not immediately respond to a request for comment on Wednesday. However, a Commerce Ministry official, speaking on condition of anonymity, said exporters hit by tariffs would receive financial assistance and be encouraged to diversify to markets such as China, Latin America and the Middle East.
A US Customs and Border Protection notice to shippers, opens new tab provides a three-week exemption for Indian goods that were loaded onto a vessel and in transit to the US before the midnight deadline.
Also exempted are steel, aluminum and derivative products, passenger vehicles, copper and other goods subject to separate tariffs of up to 50% under the Section 232 national security trade law.
Indian trade ministry officials say the average tariff on US imports is around 7.5%, while the U.S. Trade Representative’s office has highlighted rates of up to 100% on autos and an average applied tariff rate of 39% on US farm goods.
